How Long Can Economic Reality Be Ignored? -Dr. Paul Craig Roberts

Trump
and Clinton have come out with the obligatory “economic plans.”
Neither them nor their advisors, have any idea about what really needs
to be done, but this is of no concern to the media.

The
presstitutes operate according to “pay and say.” They say what they
are paid to say and that is whatever serves the corporations and the
government. This means that the presstitutes like Hitlery’s economic
plan and do not like Trump’s.

Yesterday
I listened to the NPR presstitutes say how Trump pretends to be in
favor of free trade but really is against it, because he is against all
the free trade agreements such as NAFTA, the Trans-Pacific and
Trans-Atlantic partnerships. The presstitutes don’t know that these are
not trade agreements. NAFTA is a “give away American jobs” agreement,
and the so-called partnerships give away the sovereignty of countries in
order to award global corporations immunity from laws.

As
I have reported on many occasions, the Oligarchs’ government lies to us
about everything, including economic statistics. For example, we are
told that we have been enjoying an economic recovery since June, 2009,
that we are more or less at full emploment with an unemployment rate of
5% or less, and that there is no inflation. We are told this despite
the facts that the “recovery” is based on the under-reporting of the
inflation rate, the unemployment rate is 23%, and inflation is high.

GDP
is measured in current prices. If GDP rises 3% this year over last
year, the output of real goods and services might have risen 3% or
prices might have gone up by 3% or real output might have dropped but is
masked by price increases. To know what really happened the nominal
GDP number has to be deflated by the amount of inflation.

In
times past we could get a reasonable idea of how the economy was doing,
because the measure of inflation was reasonable. That is no longer the
case. Various “reforms” have taken inflation out of the measures of
inflation. For example, if the price of an item in the inflation index
goes up, the item is taken out and a cheaper item put in its place.
Alternatively, the price rise is called a “quality improvement” and not
counted as a price rise.

In other words, by defining inflation away, price increases are transformed into an increase in real output.

The
same thing happens to the measure of unemployment. Unemployment simply
isn’t counted by the reported unemployment rate. No matter how long
and hard an unemployed person has looked for a job, if that person
hasn’t job hunted in the past four weeks the person is not considered to
be unemployed. This is how the unemployment rate is said to be 5% when
the labor-force participation rate has collapsed, half of American
25-year-olds live with their parents, and more Americans age 24-34 live
with parents than independently.

Finanial
reporters never inquire why government statistics are designed to
provide an incorrect picture of the economy. Anyone who purchases food,
clothing, visits a hardware store, and pays repair bills and utility
bills knows that there is a lot of inflation. Consider prescription
drugs. AARP reports that the annual cost of prescription drugs used by
retirees has risen from $5,571 in 2006 to $11,341 in 2013, but their
incomes have not kept up. Indeed, the main reason for “reforming” the
measurement of inflation was to eliminate COLA adjustments to Social
Security benefits.

Charles
Hugh Smith has come up with a clever way of estimating the real rate of
inflation—the Burrito Index. From 2001 to 2016 the cost of a burrito
has risen 160 percent from $2.50 to $6.50. During these 15 years the
officially measured rate of inflation is 35 percent.

And
it is not only burritos. The cost of higher education has risen 137%
since 2000. The Milliman Medical Index shows medical costs to have
risen far above official inflation from 2005 to 2016. The costs of
medical insurance, trash collection, you name it, are dramatically
higher than the official rate of inflation.

Food,
tuiton and medical costs are major outlays for households. Add zero
interest on savings to the problem of coping with major cost increases
when real incomes are stagnant and falling. For example, grandparents
cannot help grandchildren with their student loan debt when zero
interest rates force grandparents to draw down their savings in order to
supplement essentially frozen Social Security benefits during a time of
high inflation. Savings are being taken out of the economy. Many
families exist by paying only the minimum payment on their credit card
balance, which means that their debt grows monthly.

Real
economists, if there were any, looking at the real economic picture
would see an economy collapsing into widespread debt deflation and
impoverishment. Debt deflation is when consumers after they service
their debts have no discretionary income left with which to drive the
economy with purchases.

The
reason that Americans have no income from their savings is that public
authorities put the welfare of a handful of “banks too big to fail”
above the welfare of the American people. The enormous liquidity
created by the Federal Reserve has gone into the financial system where
it has driven up the prices of financial instruments. There has been a
stock market recovery but not an economic recovery.

In
the past liquidity implied economic growth. When the Federal Reserve
loosened monetary policy, the increase in consumer demand caused an
increase in the output of goods and services. Stock prices would rise
anticipating higher profits. But in recent years financial markets have
not been driven by fundamentals, which are adverse, but by the
liquidity that the Federal Reserve has pumped into the banking system in
order to save a handful of over-sized banks and insurance giant AIG,
all of which should have been allowed to fail.

The liquidity had to go somewhere and it went into the prices of stocks and bonds, causing a tremendous asset inflation.

What
sense does it make to have zero interest rates when high inflation is
eating away the real value of money? What sense does it make to have
high price/earnings ratios when the consumer market cannot expand? What
sense does it make to have a stable dollar when the Federal Reserve has
created far more dollars than the economy has created goods and
services? What sense does it make to undermine the financial condition
of pension funds and insurance companies with zero interest rates,
leaving them with no fixed income hedge against the stock market?

It
makes no sense. We are in a trap in which collapse seems the only way
out. If interest rates reflected the real rate of inflation, the
hundreds of trillions of dollars in derivatives would blow up, the stock
market would collapse, unemployment could not be hidden with
under-measurement, budget deficits would rise. What would public
authorities do?

When
crisis hits, what happens to corporations that used profits and
borrowed money, that is, debt, to buy back their own stocks in order to
keep the price high and, thereby, executive bonuses high and
shareholders happy and disinclined to support takeovers? Chaos and its
companion Fear take over from Contentment. Hell breaks loose.

Is
more money printed? Does the money find its way into consumer prices?
Do we experience simultaneously massive inflation and massive
unemployment?

Don’t expect the presstitutes, the politicians, or Wall Street to confront any of these questions.

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About Me

ROLAND SAN JUAN was a researcher, management consultant, inventor, a part time radio broadcaster and a publishing director. He died last November 25, 2008 after suffering a stroke. His staff will continue his unfinished work to inform the world of the untold truths. Please read Erick San Juan's articles at: ericksanjuan.blogspot.com This blog is dedicated to the late Max Soliven, a FILIPINO PATRIOT.
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